Glossary

Who hasn’t been in a meeting when a new concept is shared that sounds like jargon, but seems like it is important to know? Our philanthropy glossary can help you make sense of such key terms and concepts.

b

Two new hybrid forms of incorporation, available in a growing number of states, in which a for-profit corporation formally commits to meeting standards of social and environmental performance, transparency, and accountability. Similar in concept to the low-profit limited liability company (L3C) form of incorporation but a legally distinct form. Often categorized as a social business or social enterprise.

A method of planned giving in which money, property, or other assets are donated to a charitable organization after a person passes away. Bequests are usually included in a donor's will or other estate plan documentation.

c

When a charitable contribution or philanthropic act is built into -- or embedded in -- a commercial transaction, such as when a percentage of proceeds from sale of a product are then donated to a charitable cause or organization by the company selling the product. The company often uses the charitable aspect of the transaction to market the product or service.

A planned giving instrument in which a donor transfers money, property, or other assets to a trust at the time of their death, and the trust then pays out a fixed amount to a charitable organization for a set number of years. After this time, the remaining assets in the trust are transfered to the donor's heirs or other beneficiaries.

A planned giving instrument in which a donor transfers money, property, or other assets to a charitable organization and receives a partial tax deduction, and then the charity pays the donor a fixed sum at regular intervals during his or her lifetime. Upon the donor's death, the charity keeps the remaining assets as a gift.

A grantmaking institution with a broad charitable mission, almost always tied to a specific geographic area. Legally categorized as a public charity rather than a private foundation, a community foundation meets the public support test by raising donations from individuals or institutions. It then make grants or other philanthropic investments in the community, under the guidance of a board that is representative of the community. Community foundations offer different methods of giving to donors, including donor-advised funds, gifts to the foundation's permanent endowment, various planned giving options, or other earmarked gifts or special funds.

A philanthropic entity funded by contributions from a corporate entity, but established as a legally distinct entity. Almost always organized legally as a private foundation focused primarily on grantmaking, but can be a public charity or operating foundation. Contributions from the corporate entity are often made at regular intervals and so corporate foundations usually have smaller permanent endowments than other foundations. While legally distinct from the corporation's internal giving or social responsibility program, the corporate foundation very often maintains close ties to the corporation beyond simply financial ones. The foundation often gives in geographic areas in which the corporation operates, has program areas tied to corporate interests in some way, and/or has former or current employeess of the corporation as staff and/or trustees.

Philanthropic contributions made by corporations, using the same methods as individuals (e.g., giving money/grants, time/talent, in-kind products or services, and more). Corporations can give as a corporate entity and/or through a corporate foundation set up as a separate legal entity. CSR refers to the general commitment of a corporation to social benefit, including its corporate giving.

A method of raising money for an initiative or organization - often one in the initial or start-up phase - from two or more people contributing to the fundraising goal, usually through an online platform.

d

A fund established - with an initial gift and perhaps subsequent gifts from one or more donors - at a nonprofit public charity which then (for a fee) invests the money and manages the process of making grants from the fund as advised by the donor(s). The most common sponsors of DAFs are community foundations, charitable arms of for-profit financial institutions, and certain national host organizations. DAFs are not subject to the same legal rules at private foundations and are considered gifts to the public charity managing the fund even if the money is then re-granted as advised by the donor(s).

e

Expenditure Responsibility means that the foundation exerts all reasonable efforts and establishes adequate procedures:
To see that the grant is spent only for the purpose for which it is made,
To obtain full and complete reports from the grantee organization on how the funds are spent, and
To make full and detailed reports on the expenditures to the IRS.

f

While there is no legal nor widely accepted definition of what qualifies as a family foundation, the term is usually applied to a class of independent, non-operating private foundations in which: the mission and giving continues to be strongly influenced by the intent of the founding donor(s), the founding donor(s) or familial descendants play some governance role in the foundation (e.g., as trustees or even staff), and the assets come from a founding family or individual. However, some public foundations, operating foundations, and other types have these qualities as well so can be considered family foundations. Many independent foundations began as family foundations but transitioned away from family control in some way. Family foundations are often multi-generational and vary from very small to very large. In some cases, a foundation is considered a family foundation primarily because of self-identification as such.

A fiscal agent or sponsor is a nonprofit organization with 501(c)(3) status that has agreed to receive and administer a grant, for an individual, organization, or group not affiliated with a nonprofit organization or does not have 501(c)(3) status. The important distinction between a fiscal sponsorship and fiscal agency arrangement is that funds contributed to a non-exempt project that has a fiscal sponsor are tax deductible to the donor and those that are contributed to a project with a fiscal agent are not.

g

A method of giving in which a group of people combine their contributions into a single joint gift or on-going pooled fund. While there are many specific variations in form and process, most giving circles or pooled funds involve some sort of group decision-making about the target and recipients of the joint gift(s).

Giving money to a charitable organization or cause using offline or online means, or mobile technology. Offline means include checkwriting and direct cash donations as well as formal grantmaking by institutions. Online means include giving through a charity's direct website, social media, a giving portal or other online giving platform, or a crowdfunding site. Mobile giving uses technology such as text messaging and mobile apps. The different methods have different advantages and disadvantages (e.g., the level of convenience, information, fees and restrictions, etc.) and so appeal to different donors or those in particular circumstances. Whether a donor can deduct from their taxes money given through any of these methods depends on the nature of the recipient organization and whether the donor itemizes deductions.

A formalized process of giving money, usually through a private foundation or grantmakingpublic charity. Grants are usually distinguished from other gifts of money by the formal application and reporting requirements, the specific purposes for which grant funds may be used, a bounded time period for grant funds to be used, and the more explicit strategy used to guide grantmaking decisions.

h

A type of private foundation created when a nonprofit hospital or health / insurance organization is sold and converted to a for-profit enterprise. Federal law requires that the proceeds from such a sale must go to a charitable purpose, so often these proceeds are used to create a new endowed grantmaking foundation.

i

A general term for a number of methods for making socially responsible financial investments. Impact investments seek to generate multiple forms of value, to create positive social and/or environmental returns or impacts in addition to financial returns. Also called social investing and encompassing mission-related investing (MRI), program-related investing (PRI), and other emerging methods. Investments can be made by individuals, organizations, or collectives using a variety of investment vehicles. Impact investment seeks to encourage socially responsible business practices, disinvest in businesses that contribute to social or environmental harm, and provide seed or low-interest loan capital to socially-responsible business ventures. Can also apply to strategic financial investments in nonprofit entities and enterprises.

Donations of goods or services of any kind (e.g., clothing, toys, free advertising space) except money or appreciated property like real estate. Sometimes meant to include gifts of time, talent, and expertise.

A type of private foundation - with assets usually derived from a single source - that has grantmaking or other philanthropic investment as its primary focus, rather than operating programs, but that cannot be classified under other types of private foundations such as corporate, family, or health conversion. Many independent foundations were once family foundations but transitioned away from direct family influence or involvement at some point.

l

A low-profit limited liability company, a hybrid form of incorporation, available in a growing number of states, in which a for-profit venture has a stated goal of maximizing social benefits instead of profits. Designed specifically to allow and attract multiple sources of capital for the socially-oriented business, including program-related investments from foundations. Similar in concept to the new B Corps / Benefit Corporations form of incorporation but a legally distinct form. Often categorized as a social business or social enterprise.

m

A set of methods for providing financial capital, credit, and banking services to entrepreneurs, small businesses, and low-income individuals who otherwise lack adequate access to such capital and services. Can include loans, savings, microcredit, or other banking services and typically involves relatively small amounts of money. The transactions are often processed through online and/or local intermediaries, including specialized microfinance institutions.

A type of - or sometimes alternate general term for - impact investing. MRI is most commonly used to refer to socially responsible financial investment practices used by foundations or other endowed entities, in which endowment funds are invested in ways that support the mission and values of the organization.

o

A type of private foundation - with assets usually derived from a single source - that uses the majority of its assets to operate charitable programs or provide services, rather than to make grants or other philanthropic investments. Operating private foundations must follow the general IRS regulations for private foundations, but are treated and classified as a distinct legal category, separate from non-operating foundations. Most operating foundations have an endowment, and some make a limited number of grants alongside operating their programs.

p

General term for a variety of methods of giving used in financial or estate planning, in which part or all of the donation is deferred to a later date, usually the death of the donor. Often allows donors to make larger gift commitments than they could otherwise.

A tax-exempt entity legally defined under section 501(c)3 of the Internal Revenue Code, distinguished from public charity entities covered in that same section. Private foundations usually get their funds from a single primary source such as an individual, family, or corporation. The category is further divided by the IRS into operating and non-operating foundations, with the majority of foundations being the latter (including corporate, family, health conversion, and independent foundations) and pursuing their charitable missions primarily through grantmaking or other philanthropic investments. Many private foundations keep funds in an endowment, though some are pass through entities, and they can be established in perpetuity, or with a limited lifespan.

A type of impact investing in which a grantmaking institution provides capital in the form of low-interest loans, loan guarantees, or related financing methods that involve some form of repayment. PRI financing is provided to charitable organizations as well as other types such as L3Cs and socially responsible businesses. PRIs are meant to further the mission of the grantmaking institution using means beyond traditional grants, and they count toward the annual payout requirement (5% of endowed assets) for private foundations.

A tax-exempt entity legally defined under section 501(c)(3) of the Internal Revenue Code, distinguished from private foundation entities covered in that same section. Public charities derive their funding primarily from the general public, through fees for service or products, contracts, and gifts and grants. Some public charities make grants or other philanthropic contributions such as scholarships (e.g., community foundations, public foundations), but most are focused on advancing their philanthropic missions through a variety of charitable services and activities. The IRS further subclassifies a number of types of public charities, including supporting organizations.

A type of public charity that has grantmaking (e.g., for medical research or scholarships) as its primary activity. While these institutions make grants like private foundations, they are classified as public charities and meet the public support test by raising the money they use for grantmaking from multiple public sources, including individuals, corporations, private foundations, contracts and fees, etc. Even though they raise new money from the public on a regular basis, public foundations can also have some endowment.

s

A commercial entity that uses business practices and provides products or services that generate revenue in the marketplace, but does so in order to advance a social or charitable mission. Related to the idea of corporate social responsibility, but in social enterprises and social businesses the social mission is top priority and all aspects of the business - the nature of its products and services, hiring and personnel policies, environmental practices, etc. - align with that philanthropic mission. B Corps / Benefit Corporations, and L3Cs, are usually considered social businesses.

A performance-based investment mechanism bringing together government, service providers, and investors in a contractual relationship to provide the capital needed to achieve some desired social outcome. Investors provide funding, often through a coordinating intermediary, to a service provider such as a nonprofit organization. If the provider achieves certain outcomes goals and measurable results, then the government pays financial returns to the investors based on the cost-savings the government realizes because of this success.

A subcategory of public charity defined in the Internal Revenue Code and subject to certain special requirements and restrictions. A supporting organization exists to benefit, or to perform functions for or of, one or more other public charities. A supporting organization has a very close relationship with another public charity in operations and control. While there are many variations under this IRS category, and while supporting organizations are technically public charities, they often have "foundation" in their name, such as university foundations or hospital foundations that exist to raise money and provide assistance to those institutions and are influenced by and operated alongside those institutions. Also, many supporting organizations are operated under a community foundation umbrella, though supporting organizations are different from donor-advised funds in that they are distinct legal entities.

v

An approach to giving and grantmaking that borrows the language and practices of venture capital investing and adapts those to investing in charitable organizations and causes. Usually involves extensive due diligence, multi-year funding, funding for capacity building, accountability for achieving measurable results, and a high level of engagement between donors and recipients often including gifts of time and expertise as well as money.

Giving time to a charitable cause or organization without receiving financial remuneration. Often referred to as service or expanded to include giving talent, energy, expertise, etc. Often combined with other forms of giving, but can be the sole method of donating.

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